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10 February, 08:01

The law of supply declares which of the following? a. supply falls as price fallsb. supply increases as price fallsc. supply stays the same no matter how prices changed. supply falls as prices increase

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  1. 10 February, 10:38
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    The correct answer is option a.

    Explanation:

    The law of supply states that other things being constant, there is, a direct relationship between supply of a commodity and its price. It means that price and supply change in the same direction.

    This happens because when there is increase in price the total revenue to the producer increases, and so does the profit level. So, the firms will be willing to supply more, in order to enjoy higher profits.

    So, when there is a fall in the price the supply will also decline and vice versa.
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